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Restitution - Juristic Reason - Established Category (Stage 1)

. Moore v. Sweet [statutory obligation - meaning ]

In Moore v. Sweet (SCC, 2018) the Supreme Court of Canada reframes the meaning of 'juristic reason', here dealing with 'statutory obligations' as an established category:
[61] The main issue at this stage of the analysis is therefore whether a beneficiary designation made pursuant to ss. 190(1) and 191(1) of the Insurance Act — which, when coupled with Lawrence’s insurance policy, makes it clear that Risa is the one to whom the insurance proceeds are payable — provides a juristic reason for Risa to retain those proceeds in light of Michelle’s claim to the money. Put differently, the question can be framed as follows: is there any aspect of this statutory framework that justifies the fact that Risa was enriched at Michelle’s expense? If so, Michelle’s claim will necessarily fail.
. Moore v. Sweet [types of established category]

In Moore v. Sweet (SCC, 2018) the Supreme Court of Canada lists "the 'established' categories of juristic reasons: a contract, a disposition of law, a donative intent, and other valid common law, equitable or statutory obligations":
[57] The first stage requires the plaintiff to demonstrate that the defendant’s retention of the benefit at the plaintiff’s expense cannot be justified on the basis of any of the “established” categories of juristic reasons: a contract, a disposition of law, a donative intent, and other valid common law, equitable or statutory obligations (Garland, at para. 44; Kerr, at para. 41). If any of these categories applies, the analysis ends; the plaintiff’s claim must fail because the defendant will be justified in retaining the disputed benefit. For example, a plaintiff will be denied recovery in circumstances where he or she conferred a benefit on a defendant by way of gift, since there is nothing unjust about a defendant retaining a gift of money that was made to him or her by (and that resulted in the corresponding deprivation of) the plaintiff. In this way, these established categories limit the subjectivity and discretion inherent in the unjust enrichment analysis and help to delineate the boundaries of this cause of action (Garland, at para. 43).
. Moore v. Sweet ['statutory obligation']

In Moore v. Sweet (SCC, 2018) the Supreme Court of Canada considers the 'statutory obligation' established category of juristic reason, here the Insurance Act's designation of a beneficiary:
[63] Two categories of juristic reasons might be said to apply in the circumstances of this case: disposition of law and statutory obligations. Disposition of law is a broad category that applies in various circumstances, including “where the enrichment of the defendant at the plaintiff’s expense is required by law, such as where a valid statute denies recovery” (Kerr, at para. 41 (emphasis added)). The statutory obligations category operates in a substantially similar manner, precluding recovery where a legislative enactment expressly or implicitly mandates a transfer of wealth from the plaintiff to the defendant. Although there is undoubtedly a degree of overlap between these two distinct categories, what matters for the purposes of this appeal is that a plaintiff’s claim will necessarily fail if a legislative enactment provides a reason for the enrichment and corresponding deprivation, so as to preclude recovery in unjust enrichment. As Professors Maddaugh and McCamus note in The Law of Restitution:
... it is perhaps self‑evident that an unjust enrichment will not be established in any case where enrichment of the defendant at the plaintiff’s expense is required by law. The payment of validly imposed taxes may be considered unjust by some but their payment gives rise to no restitutionary right of recovery. [Emphasis added; footnotes omitted; p. 3-28.]
[64] The jurisprudence provides ample support for this proposition. Among the issues in Reference re Goods and Services Tax, 1992 CanLII 69 (SCC), [1992] 2 S.C.R. 445 (“GST Reference”), was whether suppliers registered under the Excise Tax Act, R.S.C. 1985, c. E-15, that incurred costs in collecting the Goods and Services Tax on behalf of the federal government could recover those costs from the government on the basis of restitution. For a majority of this Court, Lamer C.J. answered this question in the negative:
Under the GST Act the expenses involved in collecting and remitting the GST are borne by registered suppliers. This certainly constitutes a burden to these suppliers and a benefit to the federal government. However, this is precisely the burden contemplated by statute. Hence, a juridical reason for the retention of the benefit by the federal government exists unless the statute itself is ultra vires. [Emphasis added; p. 477.]
[65] A similar issue arose in Gladstone v. Canada (Attorney General), 2005 SCC 21, [2005] 1 S.C.R. 325. In that case, the respondents were charged under the Fisheries Act, R.S.C. 1970, c. F-14, for harvesting and attempting to sell large quantities of herring spawn. The Department of Fisheries and Oceans seized and sold the herring spawn, and the appellant Crown in Right of Canada held the proceeds pending the outcome of the proceedings. The proceedings were eventually stayed and the net proceeds paid to the respondents. Because the Crown refused to pay interest or any other additional amount, however, the respondents sought restitution in the amount of $132,000, on the ground that the Crown had been unjustly enriched by its retention of the proceeds during the time of seizure. Writing for a unanimous Court, Major J. denied that claim on the following basis:
Here, Parliament has enacted a statutory regime to regulate the commercial fishery. It has provided an extensive framework dealing with the seizure and return of things seized. This regime specifically provides for the return of any fish, thing, or proceeds realized. This was followed. Interest or some other additional amount might have been gratuitously included, but it was not. The validity of the Fisheries Act was not, nor could have been, successfully challenged. Therefore, the Act provides a juristic reason for any incidental enrichment which may have occurred in its operation. As a result, the unjust enrichment claim fails. [para. 22]
In short, it was Major J.’s position that the statutory regime, by specifying what had to be returned, made it clear that anything falling outside of the specified categories was to be retained by the Crown. In other words, the Fisheries Act stipulated that, in certain circumstances, a benefit would be retained by the Crown.

[66] These cases are examples of situations where a statute precluded recovery on the basis of unjust enrichment. It is to be noted that in each case, recovery was denied because the legislation in question expressly or implicitly required the transfer of wealth between the plaintiff and the defendant and therefore justified the defendant’s retention of the benefit received at the plaintiff’s expense. It is in this way that the applicable legislation can be understood as “denying” or “barring” recovery in restitution and therefore as supplying a juristic reason for the defendant’s retention of the benefit.

[67] What, then, should we make of ss. 190(1) and 191(1) of the Insurance Act? The former permits the insured to identify the person to whom or for whose benefit the insurance money is payable when the insured passes away. Coupled with the insurance contract, it directs the insurer to pay the proceeds to the person so designated. The latter provides that such a designation may be made irrevocably.

[68] Given the fact that a statute will preclude recovery for unjust enrichment where it requires (either explicitly or by necessary implication) that the defendant be enriched to the detriment of the plaintiff, the provisions of the Insurance Act may therefore provide a juristic reason for the beneficiary’s enrichment vis-à-vis any corresponding deprivation that may have been suffered by the insurer at the time the insurance money is eventually paid out. For this reason, an unjust enrichment claim brought by the insurer against the designated beneficiary (revocable or irrevocable) would necessarily fail at this stage; the rights and obligations that exist in that context — both statutory and contractual — justify the beneficiary’s enrichment at the insurer’s expense (Saskatchewan Crop Insurance Corp. v. Deck, 2008 SKCA 21, 307 Sask. R. 206, at paras. 47-54).

[69] A valid beneficiary designation under the Insurance Act has also been found to constitute a juristic reason that defeats a third party’s claim for the entirety of the death benefit in circumstances where that party paid some of the premiums under the erroneous belief that he or she was the named beneficiary. In Richardson (Estate Trustee of) v. Mew, 2009 ONCA 403, 96 O.R. (3d) 65, the deceased had maintained his first wife as the designated beneficiary under a life insurance policy. His second wife, who did not have a contractual right to be named as beneficiary, wrongly believed that he had executed a change of beneficiary designation in her favour, and paid some of the policy premiums — initially from a joint bank account she shared with the deceased and later from her own bank account. She sought the imposition of a constructive trust in her favour over the policy proceeds, arguing that there was no juristic reason for the first wife’s enrichment. Even accepting that the second wife could be said to have suffered a corresponding deprivation, the Ontario Court of Appeal upheld the motion judge’s finding that a valid beneficiary designation under the Insurance Act amounted to a juristic reason that defeated the second wife’s claim for the insurance money that was payable to the first wife. I would observe that the claimant in that case sought a constructive trust over the entire death benefit, and not merely the return of any payments made on the basis of her erroneous belief; the Court of Appeal did not decide whether she would be entitled to the return of those payments, and that question is not before us today.

[70] At issue in this case, however, is whether a designation made pursuant to ss. 190(1) and 191(1) of the Insurance Act provides any reason in law or justice for Risa to retain the disputed benefit notwithstanding Michelle’s prior contractual right to remain named as beneficiary and therefore to receive the policy proceeds. In other words, does the statute preclude recovery for a plaintiff, like Michelle, who stands deprived of the benefit of the insurance policy in circumstances such as these? In my view, it does not. Nothing in the Insurance Act can be read as ousting the common law or equitable rights that persons other than the designated beneficiary may have in policy proceeds. As this Court explained in Rawluk v. Rawluk, 1990 CanLII 152 (SCC), [1990] 1 S.C.R. 70, at p. 90, the “legislature is presumed not to depart from prevailing law ‘without expressing its intentions to do so with irresistible clearness’” (see also Gendron v. Supply and Services Union of the Public Service Alliance of Canada, Local 50057, 1990 CanLII 110 (SCC), [1990] 1 S.C.R. 1298). In KBA Canada Inc. v. 3S Printers Inc., 2014 BCCA 117, 59 B.C.L.R. (5th) 273, for example, the British Columbia Court of Appeal found that the Personal Property Security Act, R.S.B.C. 1996, c. 359, provided a “complete set of priority rules” that was “designed to replace convoluted common law, equitable and statutory rules that beset personal property security law with complexity and uncertainty” (paras. 27 and 21, citing Bank of Montreal v. Innovation Credit Union, 2010 SCC 47, [2010] 3 S.C.R. 3). In those circumstances, there was no “room for priorities to be determined on the basis of common law or equitable principles” (para. 22). By contrast, while the Insurance Act provides the mechanism by which beneficiaries can be designated and therefore become statutorily entitled to receive policy proceeds, no part of the Insurance Act operates with the necessary “irresistible clearness” to preclude the existence of contractual or equitable rights in those insurance proceeds once they have been paid to the named beneficiary.

[71] The reasoning put forward by McKinlay J. (as she then was) of the Ontario High Court of Justice in Shannon v. Shannon (1985), 1985 CanLII 2026 (ON SC), 50 O.R. (2d) 456, is particularly instructive in this regard. Like Michelle, the plaintiff in Shannon was the former spouse of an insured person who had contractually agreed to maintain the plaintiff as the sole beneficiary of the life insurance policy in his name and “not to revoke such beneficiary designation at any time in the future” (p. 458). Shortly thereafter, and in breach of his contractual obligation, the insured person surreptitiously changed the beneficiary designation in favour of his niece and nephew. He passed away several years later, and when the plaintiff discovered the change in beneficiary designation, she commenced an action asserting her entitlement to the proceeds of her former spouse’s insurance policy. McKinlay J. found in her favour and made the following observations (at p. 461):
It would appear from s. 167(2) [i.e. the predecessor of s. 190(2) of the Insurance Act] that the insured may at any time before the filing of an irrevocable declaration alter or revoke an existing designation by way of a declaration.

The position of the defendant is that this is precisely what the insured did, and that any finding of the court of a trust in favour of the plaintiff would have the effect of the court’s attempting to overrule a clear statutory provision.

But the Insurance Act provides a statutory framework for the protection of the insured, the insurer and beneficiaries; equity imposes duties of conscience on parties based on their relationship and dealings one with another outside the purview of the statute. When he concluded the separation agreement with his wife, the deceased bound himself to maintain the policy in good standing, which he did; he also bound himself to maintain it for the benefit of his wife, which he did not. [Emphasis added.]
[72] Shannon therefore supports the proposition that while the Insurance Act may provide for the beneficiary’s entitlement to payment of the proceeds, it “does not specifically preclude the existence of rights outside its provisions” (p. 461). Similarly, in Chanowski v. Bauer, 2010 MBCA 96 (CanLII), 2010 MCBA 96, 258 Man. R. (2d) 244, the Manitoba Court of Appeal recognized that courts have readily accepted that contractual rights to policy proceeds may operate to the detriment of named beneficiaries:
Generally, the courts have imposed remedial constructive trusts in factual circumstances where the deceased has breached an agreement regarding life insurance benefits. These have arisen most commonly in cases where the husband executed a separation agreement promising to retain his former wife as the beneficiary of his life insurance policy and, in contravention of that promise, before his death, the deceased changed the designation of his beneficiary to that of his present wife or another family member. [para. 39]
[73] Accepting that contractual rights to claim policy proceeds can exist outside of the Insurance Act, can an irrevocable designation under the Insurance Act nonetheless constitute a juristic reason for Michelle’s deprivation? In my view, it cannot. This is because the applicable statutory provisions do not require, either expressly or implicitly, that a beneficiary keep the proceeds as against a plaintiff, in an unjust enrichment claim, who stands deprived of his or her prior contractual entitlement to claim such proceeds upon the insured’s death. By not ousting prior contractual or equitable rights that third parties may have in such proceeds, the Insurance Act allows an irrevocable beneficiary to take insurance money that may be subject to prior rights and therefore does not give such a beneficiary any absolute entitlement to that money (Shannon, at p. 461). Put simply, the statute required that the Insurance Company pay Risa, but it did not give Risa a right to keep the proceeds as against Michelle, whose contract with Lawrence specifically provided that she would pay all of the premiums exclusively for her own benefit. Neither by direct reference nor by necessary implication does the statute either (a) foreclose a third party who stands deprived of his or her contractual entitlement to claim insurance proceeds by successfully asserting an unjust enrichment claim against the designated beneficiary — whether revocable or irrevocable — or (b) preclude the imposition of a constructive trust in circumstances such as these (see Central Guaranty Trust Co. v. Dixdale Mortgage Investment Corp. (1994), 1994 CanLII 1429 (ON CA), 24 O.R. (3d) 506 (C.A.); see also KBA Canada).

[74] On this basis, the applicable Insurance Act provisions are distinguishable from other legislative enactments that have been found to preclude recovery, such as valid statutory provisions requiring the payment of taxes to the government (see GST Reference, at pp. 476-77; Zaidan Group Ltd. v. London (City) (1990), 1990 CanLII 2624 (ON CA), 71 O.R. (2d) 65 (C.A.), at p. 69, aff’d 1991 CanLII 53 (SCC), [1991] 3 S.C.R. 593). In that context, the plaintiff’s unjust enrichment claim must fail because the legislation permits the defendant to be enriched even when the plaintiff suffers a corresponding deprivation. The same cannot be said about the statutory framework at issue in this case, however; there is nothing in the Insurance Act that justifies the fact that Michelle, who is contractually entitled to claim the policy proceeds, is nevertheless deprived of this entitlement for Risa’s benefit.

[75] Moreover, in my view, the fact that Shannon was decided prior to Soulos and Garland is of no moment (Court of Appeal decision, at paras. 84 and 89). While those cases add to our understanding of the law on constructive trusts and unjust enrichment, they do not in any way undermine the holding in Shannon with respect to the effect of the Insurance Act in circumstances such as these.

[76] The majority below came to the opposite conclusion on this issue. Having considered the legislative regime governing beneficiary designations in Ontario, Blair J.A. held that the Insurance Act framework “lean[s] heavily in favour of payment of the proceeds of life insurance policies to those named as irrevocable beneficiaries, whereas it continues to recognize the right of an insured, at any time prior to such a designation, to alter or revoke a beneficiary who does not fall into that category” (para. 83). On this basis, he concluded that the legislative regime under which Risa had been designated as the irrevocable beneficiary of Lawrence’s life insurance policy supplied a juristic reason for her receipt of the proceeds, since it constituted both a disposition of law and a statutory obligation (para. 99).

[77] With respect, I disagree with two aspects of Blair J.A.’s reasons. First, he framed the issue as being whether the applicable Insurance Act provisions, pursuant to which Risa had been designated as irrevocable beneficiary, provided a juristic reason for her receipt of the insurance proceeds (paras. 26(iii) and 83). This, in my view, is the wrong perspective from which to approach this third stage of the unjust enrichment analysis. As stated above, the authorities indicate that the court’s inquiry should focus not only on why the defendant received the benefit, but also on whether the statute gives the defendant the right to retain the benefit against a correspondingly deprived plaintiff — in this case, whether the Insurance Act extinguishes an unjust enrichment claim brought by a plaintiff at whose expense the named beneficiary was enriched (GST Reference, at p. 477; Kerr, at para. 31). And given the view expressed earlier in these reasons, it seems to me that the Insurance Act does not.

[78] Second, Blair J.A. placed a significant degree of emphasis on the distinction between revocable and irrevocable beneficiaries, and on the certainty and predictability associated with the statutory regime governing irrevocable designations. While it is clear that an irrevocably designated beneficiary has a “statutory right to remain as the named beneficiary” and is therefore “entitled to receive the insurance moneys unless he or she consents to being removed” (para. 82), I am still not persuaded that s. 191 of the Insurance Act can be interpreted as barring the possibility of restitution to a third party who establishes that this irrevocable beneficiary cannot, in good conscience, retain those monies in the face of that third party’s unjust enrichment claim. To borrow the words of Professors Maddaugh and McCamus, “the fact that the insurer is directed by statute, implicitly if not directly, to pay the insurance monies to the irrevocable beneficiary, does not preclude recovery by the other intended beneficiary where retention of the monies by the irrevocable beneficiary would constitute an unjust enrichment” (The Law of Restitution, at p. 35-16). Therefore, the fact that Risa was designated pursuant to s. 191(1) of the Insurance Act, as opposed to s. 190(1), does not assist her against Michelle in the circumstances of this case.

[79] I would also observe that the majority below declined to “go so far as to say that the designation of a beneficiary as an irrevocable beneficiary under the Insurance Act invariably trumps a prior claimant” (para. 91), but nevertheless found that it did in this case. It is with this latter statement that I would disagree; as outlined above, my view is that the statutory scheme does not prevent a claimant with a prior contractual entitlement from succeeding in unjust enrichment against the designated beneficiary.

[80] My colleagues take the position that the Insurance Act provides a juristic reason for Risa’s enrichment because it specifically provides that the proceeds, once paid to the irrevocable beneficiary, are immune from attack by the insured’s creditors. They say that because “Michelle’s rights are contractual in nature, she is a creditor of Lawrence’s estate and thus, by the provisions of the Insurance Act, has no claim to the proceeds” (para. 122). While there is no dispute that Michelle may have a claim against Lawrence’s estate, my view is that she is also a person at whose expense Risa has been enriched — and therefore a plaintiff with standing to claim against Risa in unjust enrichment. And while the Insurance Act specifically precludes claims by creditors suing on the basis of some obligation owed by the insured’s estate, it does not state “with irresistible clearness” that a claim in unjust enrichment — i.e. a claim based on a different cause of action — brought by a plaintiff who also has a contractual entitlement to claim the insurance proceeds must necessarily fail as against the named beneficiary.

[81] For all of the foregoing reasons, I would echo the conclusion arrived at by Lauwers J.A., dissenting in the court below, that “[Michelle’s] entitlement to the insurance proceeds as against [Risa] is neither precluded nor affected by the operation of the Insurance Act”, with the result that this case “falls outside the category of disposition of law as a juristic reason to permit [Risa] to retain the life insurance proceeds” (para. 229).

[82] Since there is no suggestion that any other established category of juristic reason would apply in these circumstances, my conclusion at this first stage is that Michelle has made out a prima facie case.


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Last modified: 04-02-23
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